This article was originally published on October 18, 2018, we’re re-sharing it here because a new variant with a new headline is driving a lot of questions our way… Koyfman is now apparently taking advantage of the fact that Tesla’s in the news again by teasing this as a new spiel that starts out:
“Tesla Is Now the Most Successful Electric Vehicle Manufacturer in the World
But in Less Than Three Years’ Time, its Cars Will Be Out of Date…
And It’s All Because of This Device:”
The ad is otherwise still the same, though, and there hasn’t been any substantial change to the company being teased (I’ll provide a slight update in the P.S. at the bottom), so we’re just re-running that article with no real updates. What follows has not been revised since mid-October:
This teaser pitch has everything you’d dream about… a “david and goliath” story, a huge market that’s ripe for innovation, a “doing good by getting rich” aspect because it helps make renewable energy more effective… and, of course, the dreams of riches that come from a penny stock.
So, naturally, we want to figure out what the real story is. The ad comes from Alex Koyfman, who’s pitching his Penny Stock Millionaire ($999/year), and the letters introducing the ad talk up the “I’ve been pitched dumb stuff before, and I can tell this one is for real” aspect of the story… here’s a taste of the ad:
“I’m no newbie to the game of salesmanship, so I was hesitant to believe the scope of this thing at first.
“But after the 30-minute conversation was over, I knew I would never view the world the same way again.
“It was like I’d spoken to Thomas Edison himself and heard his plans months before the rest of the world had any idea what was happening.”
It’s OK to roll your eyes at that last sentence, we’ve got plenty of time. All set? OK, here’s some more of the story from Koyfman…
“This company’s product is already entering the market.
“It’s already signed licensing deals to put this technology into a wide array of commercial products.
“Its stock is already responding.”
OK, so that sounds pretty cool — already getting designed into commercial products? What else? How about some clues about the actual technology they’re selling?
“It took a stroke of genius and the work of a barely known, development-stage company to finally make a quantum leap in electric motor design.
“Within the next few years, this technology will replace everything that’s come before it…..
“Electric generators and motors work at peak efficiency in a narrow speed and torque range. And that limits their abilities to convert energy or produce electricity efficiently as speed varies.
“This results in great energy losses in all applications, most notably: Wind power generation, electric cars and mass transit vehicles, run-of-river generation, mining operations, etc….
“What this company did, that no company before it has ever been able to do, is build a gearing system into the spool itself.
“Only, it’s not mechanical like the kind you’d find on a bike or inside the gearbox of your car.”
Huh? OK, so some kind of variable control for that coiled copper wire that makes an electric motor work? I’m getting beyond my depth pretty fast here, but let’s grab a few other clues:
“The system is called ‘dynamic power management’ (DPM). And today, it’s giving the same kind of advantage to a whole new generation of electric motors and generators.
“It’s the same kind of advantage that a 10-speed bike would have over a primitive bike from the 1800s or a child’s tricycle.”
That makes a little more sense, even for a non-engineer like me.
There’s some truly hyperbolic talk in the ad, too, even beyond the “this is like listening to Thomas Edison” bit:
“… it’s a single invention that within the next five to 10 years will make every existing electric motor and power generator obsolete.”
We’re told that this new electric motor technology will improve efficiency, reduce size, and increase safety…. and that it will touch almost everything, since the vast majority of energy consumption touches a conventional electric motor — either directly, in moving your electric car, or indirectly, in that electricity generation turns kinetic energy (spinning gas turbines, moving windmill blades, etc.) into electricity using basically the same kind of electric motor in reverse.
And finally, a few more clues from the ad:
“World-changing innovations tend to take hold quickly. And this company has already taken the first three steps.
“This past spring, the company inked a partnership deal with a major North American electric motor and generator producer.
“The partner is a heavy hitter that manufactures motors and generators for a wide variety of industrial and commercial applications.”
OK, so that means we don’t even need the other two steps — if you’re curious, they’re “small wind turbines” and train motors, both of which are being developed in partnership with this same “major North American electric motor and generator producer.”
But we’ve got plenty for the ol’ Thinkolator to chew on… what’s our answer?
This is little Exro Technologies (XRO.CX on the CSE in Canada, or EXROF OTC in the US), a company that is trying to sell their power management technology which uses “dynamic coil wiring switching” to make electric motors (and generators) more efficient. Koyfman even pulled some of the images in his ad from the company’s investor presentation slides, in case you require any confirmation.
That same presentation indicates that the company has invested $12 million in developing this technology, and as of January had built three prototypes and demonstrated, for the generators, “energy efficiency gains ranging from 2% to 7%” — which would, of course, be huge in the big picture, if all generators just immediately switched over to this technology… but it doesn’t sound like it’s necessarily overwhelming in any individual instance, particularly since this is a pretty early stage prototype we’re talking about, which I would guess might make it hard to convince companies to invest in the technology (they don’t plan to build motors or generators themselves, they’re hoping to design and sell power management systems to the companies who do make that stuff).
Exro has a video that explains the basics of their technology and the reason they think it’s going to be important — they focus on the fact that their dynamic system lets them adjust the operation of the motor in real time to make it more efficient. That’s important for generating electricity from things like wind power, where the speed of the turbine is not stable or predictable, or for things like powering electric cars and trains, where there are distinct needs, with different optimal efficiencies, depending on whether the vehicle is starting from a dead stop or maintaining a high speed — some of the material notes that electric cars often include multiple electric motors for different purposes (startup versus cruising), and this might enable them to use just one motor. This is how they describe it on the website:
“Our technology is designed to increase efficiencies while harnessing energy in variable settings
“Exro’s DPM (Dynamic Power Management) technology is a control system that integrates wiring of the rotating machine coils into the power electronics. This gives the power electronics control of the machine coil wiring configuration in real time. Each configuration has related but different operating characteristics, providing a range of options in place of a fixed machine configuration.
“The more variable the application, the greater the efficiency and economic gains.”
And that’s about all I can tell you about that — I don’t know much about engineering, and I have no idea whether this dynamic power management is really a brand new idea, or is revolutionary or unique or likely to change the world… or just another “guy with a new engine design” that will be forgotten, as hundreds have been in the past.
Koyfman almost certainly found out about this company by attending the LD Micro Conference in New York last month, the folks at Angel Publishing have long used the LD Micro microcap conferences as places to find their penny stock ideas that they then tease to us with promises of remarkable potential — and, since these are penny stocks that usually need constant financing and are always likely to have a very high failure rate, the CEOs know they have to sell themselves and they’re usually very happy to talk to newsletter editors (and even individual investors).
These kinds of “turning R&D into a product” companies all have ideas that they hope will change the world, and they often have a well-crafted “elevator pitch,” but a little skepticism would generally not be misplaced — the companies who sign up to present at LD Micro and similar conferences are not those you’d want to risk your retirement or your kids’ college savings on, these are rank speculations.
Which is why, just to give you a few more moments to think it over, I published this piece after the market close… writing about a company like this to a few thousand of my closest friends is likely to impact the share price, even if I don’t say anything particularly exciting about the stock. It has a market cap of only about C$15 million, and only went public about a year ago… though they haven’t reported their financials recently, and did a secondary for about $1.8 million and set up an “at will” financing agreement for another (up to) $5 million (both in Canadian dollars, I assume), so the market cap might be a bit higher now.
They do have a few pre-commercial collaborations announced, usually described without a lot of timeline detail, but the key one seems to be their partnership with Potencia Industrial, a Mexican motor and generator company, that’s described here. Potencia appears to have been around for a long time, but it’s private and we don’t know anything about their finances. The announcement specifies those three areas in which Exro and Potencia will collaborate to integrate the technology into Potencia’s motors (car conversion kits, small wind turbines, and trains and trams), but doesn’t talk about the commercialization timeline.
This is still what I’d call R&D work, from what I can tell. I can’t believe that replacing the power train for a taxi is going to be cost-effective in an industry where the turnover should be “every couple years” for all their cars, but who knows, Mexico City is trying to move to more electric taxis (including some from Carlos Slim’s company, and some from China)… it would be nice if it works, though even if it is as revolutionary as Koyfman claims I imagine that the commercialization of the technology will probably take a lot longer than they hope it will.
That’s not a surprise, of course — the way to sell a penny stock is to conjure up dreams of it beating the big guys with some super-secret technique or technology that’s going to suddenly take over the market. It rarely happens that way, particularly in hard-to-scale businesses where you have to build stuff, but the hope is always there (remember little Eguana? That company was supposed to beat Tesla at the “power management” game, per Koyfman’s teasers back in 2016, and they’ve been making slow progress and have even generated a little revenue now, but still haven’t gotten anywhere near the point where the fundamentals make sense).
And always, of course, we have the lingering thought… if this company was really going to change the world, wouldn’t some much larger company that knows this company better than I do just swoop in and buy them for their supposedly better technology? After all, this is a $15 million company (and Eguana is about $40 million), which is less than what a big player like Emerson Electric (EMR) makes in profit (not sales, but actual profit) every week.
The good news is that they want to sell their power management technology, building it into circuit boards for other company’s motors, not build anything themselves… which means that the potential is very high and operating costs will be low. But the risk of failure or long delay is also very high, all they have so far is test projects with a few partners, and we don’t really know if they’ll be able to commercialize the technology at all. That is, of course, why the company is valued at only $10-20 million, and why the stock trades for pennies.
So… that’s about all I can tell you. If you want to invest in teensy companies like this, I’d urge you to make your investments small and be extremely involved in learning about the company’s prospects and plans — the finances won’t be appealing for a long time, if ever, so you would have to invest based on your understanding of the technology and the company’s ability to commercialize that technology, and build that understanding reading something beyond just what they put in their promotional materials. I don’t understand the technology very well, and I’m skeptical of the commercialization timeline and potential, so I’ll stay on the sidelines… but your mileage (or voltage) may very well vary, so feel free to share your thoughts with a comment below.
P.S. Here’s your December update… The story is essentially the same today as it was when Koyfman started teasing the stock in October. The company has released another six-month financial report that is effectively the same as the prior period — still no revenue to speak of, no major deals, iterative progress with their partner in testing their prototype, and rising costs that seem to mostly be for consultants, persumably on the R&D work, paid for by selling shares and warrants. You can see their interim MD&A at SEDAR here and the financials are here.